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Factoring For Computer Software Companies

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If asked to name the biggest expense for computer software businesses, most people would immediately jump to the equipment itself. After all, computers and computer programs can be expensive to buy for shoppers, so they must be costly to create.

This is a common misconception, however, because the materials and resources needed to manufacture computer parts are actually quite cheap. It is the skill involved in developing them that pushes expenses up. For computer software companies, payroll commitments are often the hardest part of running a business.

Fortunately, there is a way to make things easier. It is called invoice factoring and it can be used by almost any industry operating today. If you are not familiar with factoring for computer software companies, this handy guide will tell you all that you need to know.

What is Exactly is it?

Factoring is a surprisingly simple form of finance. It is provided by a reliable agent, who does not technically play the role of lender. It is important to understand that this financing option does not involve loans. It just makes a change to money that you are already owed, with the change being a faster progression through the invoicing process.

It is very simple. Imagine that Business 1 agrees to sell an order of computer software products to Business 2. Once delivered, Business 1 invoices Business 2 for the cost of this order. If all goes as it should, Business 2 pays the invoice without incident. The problem is that, even if all parties act as they are required, Business 2 can still end up taking a long time to pay.

For a company operating within narrow profit margins, this is a problem. It can lead to serious issues with cash flow and make it difficult to pay designers and developers. If you have to wait around a month for an invoice to be completed, you are going to have to find that cash somewhere else in the meantime.

What factoring for computer software companies does is use a ‘middleman’ (the factoring firm or agent) as a holding place for this payment. So, the factoring agent pays for the invoice on behalf of the customer. It essentially buys the invoice from the lead business, at a slightly reduced price. It then deals directly with the customer, in order to recover this sum.

Why is Factoring for Software Companies Beneficial?

On top of being able to access your money almost immediately, factoring for computer software companies means that your business can hand over the stress of invoicing. Once you have been paid for the goods (by the factoring agent), your part in the process is effectively over. You can focus your attention on another part of the business.

With support from Capital Funding Solutions, everybody wins. Your business gets to free up capital from goods sold. The customer is given a reasonable amount of time in which to process and complete payment.

With factoring clients in Florida, Texas, New York, Georgia, Michigan, Virginia, and more, it is fair to say that CFS has the experience that you need to set up a great factoring agreement.

Factoring For Computer Software Companies in Florida, Texas, New York, Georgia, Michigan, Virginia…